New Zealand Dollar Tumbles After Fonterra Lowers Payout Forecast

By Allison Bennett -
Aug 28, 2012

New Zealand’s dollar fell against
all its major counterparts after the nation’s biggest dairy
exporter lowered the forecast for how much it would pay farmers.

The so-called kiwi touched an almost four-week low versus
the yen after Fonterra Cooperative Group Ltd. said a stronger
currency was eroding profits from rising commodity prices. The
Australian dollar declined for a fifth day against Japan’s
currency, the longest streak since November, after a private
report showed the South Pacific nation’s new home sales dropped
for the first time in four months.

“Dairy-related influences have a habit of impacting the
New Zealand dollar,” said Nick Bennenbroek, head of currency
strategy at Wells Fargo & Co. in New York. “You look at the
wider implications in the decline in the payout, and that has a
noticeable impact on the economy.”

The kiwi dropped 0.8 percent to 63.17 yen yesterday in New
York after declining to 63.082 yen, the weakest since Aug. 1. It
fell 0.5 percent to 80.46 U.S. cents. The Aussie weakened 0.2
percent to 81.47 yen after touching 81.23, the lowest since July
26. It was 0.1 percent stronger at $1.0377.

Whole-milk-powder prices rose to an eight-week high at the
company’s most recent GlobalDairyTrade auction on Aug. 15. New
Zealand’s dollar has risen 3.7 percent this year, making it the
second-best performer in the Group of 10 currencies after the
Swedish krona.